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South Florida housing in recovery but lenders still too cautious

SOUTH FLORIDA – April 28, 2009 – President Barack Obama took aim at the housing crisis during his first 100 days with a broad plan to stabilize the market by trying to prevent foreclosures, pushing down mortgage rates and offering a handsome tax credit to new buyers.

But has the effort helped South Florida, where foreclosures are soaring, many homeowners have little or no equity and price declines show no sign of abating?

The answer: A little bit – at least, so far, according to real estate analysts, distressed homeowners and the people trying to help them.

Interest rates and lower prices have spurred sales, but the steep fall in South Florida home values has kept hundreds of thousands of borrowers from refinancing and is prompting otherwise solvent homeowners to abandon their properties. Meanwhile, loan modifications remain time-consuming and difficult to obtain.

Perhaps the biggest roadblock to recovery in South Florida is that banks, for the most part, still aren’t lending.

“The administration … is clearly having an impact in mitigating this disaster,” said Mike Larson, a real estate analyst with Weiss Research in Jupiter. “But ultimately, it’ll be the passage of time with lower prices and a turn in the broader economy that will finally put this housing downturn behind us.”

There’s no question that falling prices coupled with low interest rates have unleashed pent-up demand among buyers. Sales in Miami-Dade and Broward counties have jumped in the past two months. Interest rates have dropped to levels not seen in 50 years.

And, sweetening the pot for new buyers, the Obama administration added a bonus – an $8,000 tax credit. To qualify, buyers must not have bought a home in the past three years and must close before Dec. 1.

But the continued lack of volume lending and stringent lending standards that even the most qualified borrowers have trouble meeting are hampering demand for homes and condos.

“Obama has taken bold initiatives. He’s pumped billions into the bigger banks. But until those banks go out and start opening their lending spigots, it really is going to be tough to slow the foreclosures and price declines,” said William Kerdyk, president of Kerdyk Real Estate in Coral Gables and vice mayor of that city.

The merciless slide in home prices has also made it tough for many homeowners to benefit from other new initiatives.

In Miami-Dade, the median single-family home price, for instance, has fallen almost 49 percent from a high of $402,229 in January 2007 to $205,600 last month. In Broward, the median has fallen 41 percent, from a high of $374,787 to $219,500. The median is the price point at which half the homes sold for more and half for less.

In February, the administration announced a rescue plan that set aside $75 billion to subsidize lower monthly payments for as many as five million home buyers facing foreclosure. Also under the plan, an additional four million homeowners current on their payments would be allowed to refinance. The plan, however, applies only to borrowers who owe between 80 percent and 105 percent of the current market value of their property, with loans owned or backed by Fannie Mae or Freddie Mac.

The loan-to-home-value standard automatically eliminated almost 300,000 borrowers in Miami-Dade and Broward, according to an analysis by Zillow.com.

“So many people are a good 30 to 40 percent under water,” said Melinda Payan, a mortgage broker based in Southwest Ranches with clients in South Florida and Atlanta. Payan said customers in Atlanta were benefiting from the program, but not here, where loan modifications seem like the only option.

On that front, homeowners complain that recalcitrant banks won’t modify their loans unless they fall behind, even though the Obama plan offers incentives to lenders who reach borrowers before they default.

Jimmy Herrera, 28, under water by more than $50,000 on the Hialeah condo he bought last year, said he has little confidence his bank will offer a loan modification because he hasn’t yet missed a payment.

“I think Obama has focused on the issues at hand, but I don’t think the banks are listening,” Herrera said.

For those who are in foreclosure, lenders have stepped up their loan modification efforts in the past 100 days, said Avi Shenkar, president of GMA Modification in Miami Beach, and Nora Torres, a foreclosure counselor with the Broward County Housing Authority.

Shenkar, whose company is handling about 800 cases, said only a few had been modified under Making Home Affordable, which reduces payments to no more than 31 percent of a borrower’s gross annual income. Torres said none of her clients had received a modification under the program.

Nonetheless, they believe the plan will eventually make a dent in foreclosures.

“Strict guidelines that lenders have to follow will make it quicker and easier to get modification done,” Shenkar said.

But borrowers aren’t likely to stick with the program if prices keep falling, said attorney Roy Oppenheim, whose firm specializes in foreclosure prevention.

Retiree Carmen Carrio, for instance, bought a condo in Dadeland four years ago and got her loan modified in December. After a condo next door sold as a foreclosure for $75,000 this month, she decided to stop making payments on her $171,000 loan.